Russia attempts to buy-back European debt

Russia may soon reach an agreement with the Paris Club to repurchase some of its bilateral debt.

Comments from the Kremlin have recently suggested that the Russian government would agree to an at-par buyback. This comes at a time when one of Russia’s largest creditors agreed in principle last month to an at-par buyback (100 percent of the debt’s face value).

Previously, at least some of its creditors had been adamant that Russia pay a premium on its repurchase of debt because the debt was extended at below-market rates when the country’s finances were in much worse shape than they are currently.

Russia is looking to reduce its foreign debt since growing oil revenues have increased its reserves. The Russian finance minister said on Thursday that a deal with the Paris Club could reduce the proportion of Russia’s foreign debt to 50 percent. It was at around 80 percent at the beginning of the year.

Russia is especially eager to repay these debts before its European creditors, in serious financial trouble themselves, sell the debt on the capital markets. Germany, one of Russia’s largest creditors at around $18 billion of the $43 billion that Russia owes, did just that last year when they repackaged around €5 billion of Russia’s debt into securities to be sold in the capital markets. That had the effect of undermining the price of Russia’s bonds.

Story link: Russia attempts to buy-back European debt